When a former chef starts a business producing chilled soup for local offices, he writes down his sales forecast before buying manufacturing equipment. His ...
Question 1 Report
When a former chef starts a business producing chilled soup for local offices, he writes down his sales forecast before buying manufacturing equipment. His market research suggests that customers want fresh soup delivered before lunchtime. He is deciding whether the forecast should be shown to a potential investor.
(a) Identify one factor that could make the sales forecast inaccurate. [1]
(b) Explain one reason why the investor would want to see the sales forecast. [1]
Answer Details
(a) A sales forecast could be inaccurate because of a change in customer demand, a new competitor, incorrect market research, or changing economic conditions. Any of these can mean actual sales differ from the predicted figure. [1]
(b) An investor wants to see the forecast because it helps them judge likely future sales revenue and whether the business may make a return on their investment or repay finance. [1]
Examination reminder: A forecast is an estimate, not a guarantee. Explain uncertainty by identifying a factor that could change after the forecast is made.
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